Stock Market Futures Inches Higher After Strong Rally On Tuesday
The U.S. stock market futures climbed on Wednesday’s pre-market trading session, with global stocks mostly higher. We could be looking at another rally taking place today. The week started out with major benchmarks suffering their worst declines in nine months. That is despite the quarterly earnings showing a strong rebound. However, it appears that investors have temporarily cast their fears aside and reconsidered some of the pessimism in Tuesday’s session.
Perhaps, it could be investors rushing in to buy stocks that had been knocked down in Monday’s steep selloff. But what really seems to be the case may be because some analysts pointed out that the rise in COVID-19 cases has not increased hospitalizations and deaths as dramatically. In fact, they are far below where they were during the worst days of the outbreak. And that has led many investors to reconsider their pessimism during Tuesday’s trading session.
With strong corporate earnings backing the recovery of the U.S. economy, Wall Street is expected to kick off Wednesday with a strong rally. Despite the more transmissible Delta variant casting a shadow over the nation’s economic outlook, many still see few attractive alternatives to stocks. It also appears to me that investors are likely more concerned about growth rather than inflation as of late. With many companies topping estimates thus far, could it be possible for the rally to extend until the end of the week? As of 7:19 a.m. ET, the Dow and S&P 500 futures are rising by 0.43% and 0.27% respectively. Meanwhile, Nasdaq futures are falling by 0.08%.
US Treasury Yields Rebound, 10-Year Treasury Above 1.2%
The 10-year U.S. yield climbed to above 1.23% on Wednesday morning. This came after it dropped earlier in the day to another five-month low. Meanwhile, yields on shorter U.S. Treasuries that are maturing in two to five years have also slipped. With the recent movement of these figures, it could suggest that investors are eyeing a later start to the Fed’s tightening process. They may also be re-assessing their long-term economic outlooks.
“The market’s expectations for an accelerated tightening cycle have been pushed back, as reflected in bond yields,” said Edward Moya, senior market analyst for the Americas at Oanda Corp. “Global growth concerns were somewhat overdone and a delayed global economic reopening is not necessarily a major roadblock. Risky assets will still remain attractive, given how low global bond yields are.”
Moderna Stock Test All-Time High Ahead Of S&P 500 Inclusion
Due to its globally in-demand coronavirus vaccine, Moderna (NASDAQ: MRNA) is one of the hottest biotech stocks in the stock market today. The recent market worries about the spread of the Delta variant also served as an additional catalyst for MRNA stocks. As many countries rush to secure new doses to inoculate their citizens, this means that Moderna is in a good position to bring in solid revenue in the coming years. But does that make Moderna stock a buy for new investors?
The major catalyst for its recent rally is its inclusion in the S&P 500 today. Moderna will replace Alexion Pharmaceuticals (NASDAQ: ALXN) in the index. The company mentioned that it has delivered over 100 million vaccines so far, and is on track to deliver up to 3 billion by 2022. While those numbers are impressive, Moderna’s vaccine may not be as effective at reducing the transmission of the Delta variant. Nevertheless, it is still highly effective in reducing hospitalizations and deaths. More importantly, the possibility of a booster shot and higher guidance has excited many investors. Still, MRNA stock took a breather yesterday. That could continue today judging by its pre-market activity as of 7:32 a.m. ET.
Tesla To Open Up ‘Supercharger’ Stations To Other EVs
Tesla (NASDAQ: TSLA) CEO Elon Musk said that the company’s Supercharger network will be open to other types of electric vehicles this year. Should Tesla open up significant numbers of its charging stations in the U.S., it could potentially make its mark in the EV charging market. The company may even be able to tap into new government fundings. The EV maker will be reporting its second-quarter results on Monday after the closing bell.
To date, the connectors Tesla uses are still incompatible with other EVs. It’s worth noting that competitors in the U.S. have long focused on serving EVs from a wide range of automakers. These charging companies include ChargePoint (NYSE: CHPT), Volta (NYSE: SNPR), Blink Charging (NASDAQ: BLNK), and many others. And companies like ChargePoint are already dominating the EV charging space right now. Sure, Tesla may be able to bring in a new revenue stream. But to be dominant in the EV charging space is another question to answer.
Q2 Earnings Season Kicks Into High Gear
Netflix (NASDAQ: NFLX) reported its second-quarter earnings after the closing bell on Tuesday. The streaming giant beat analysts’ expectations for new subscribers in the quarter but missed the target for estimates for Q3 2021. Separately, Chipotle Mexican Grill (NYSE: CMG) also reported another smashing quarter. This is thanks to the mass returns of customers after restrictions were lifted and the ongoing strength in digital sales.
As U.S. Treasury yields have been on the decline, it seems that investors are banking on strong earnings reports to bring higher returns to their portfolios. But many still believe in owning stocks despite what others may feel about the stock market today. Jim Paulsen, chief investment strategist at the Leuthold Group commented, “Until the 10-year yield rises back above 1.3% and stays above that level for a few days, today’s stock market rally is likely tentative.”
The most notable earnings releases today include Coca-Cola (NYSE: KO), Johnson & Johnson (NYSE: JNJ), Las Vegas Sands (NYSE: LVS), and Verizon Communications (NYSE: VZ), just to name a few. All in all, the bond market may have brought some stability to stocks on Tuesday. But corporate earnings will decide if stocks can continue to push higher after a weak start.